Higher-than-expected operating losses have led to Hershey, Pa.-based Penn State Health being downgraded on a series of bonds from "A+" to "A", S&P Global said April 6.
Original budgets for the first part of fiscal 2023 targeted a slightly positive full-year operating margin, but data shows a $75 million lower-than-forecasted figure, S&P Global said. Operating income showed a loss of $154.5 million for the six months ending Dec. 31 compared with a $48.8 million loss in all of fiscal 2022.
"The downgrade reflects unexpected operating losses in fiscal 2022 that have rapidly escalated through the first half of fiscal 2023 and contributed, along with weak investment market performance, to materially thinner unrestricted reserves relative to both operating expenses and debt outstanding," the research note stated.
The outlook for Penn State Health remains stable amid continued strong demand for its services and increased capacity.
Penn State Health is jointly owned by Pittsburgh-based Highmark and Penn State University with a flagship teaching hospital in its Hershey Medical Center. It also operates a 128-bed Children's Hospital as well as four other hospitals whose total licensed bed capacity is 773.